Uber – a ‘fare’ deal?

On 28 October 2016 the Employment Tribunal ruled in favour of two Uber drivers seeking to establish their status as 'workers' as the first of a number of such cases backed by the GMB union. Similar arguments are currently being made on behalf of courier drivers against CitySprint and three other courier companies. The decision may have implications for the increasing number of media and tech businesses and workers who operate within what has become called the 'gig' economy.

Uber launch party
Image credit: flickr/creativecommons, 5chw4r7z

Impact of ‘worker’ status

In this case, Uber sought to argue that its drivers were independent self-employed contractors who could choose where and when they worked and effectively ran their own businesses. Under relevant legislation a distinction is made between this type of self-employment, and a category of self-employed worker who is not an employee, but not running a business either, often referred to in legal commentary as a ‘limb (b)’ worker. Such workers are entitled to a number of different employment protections, including the National Minimum Wage and paid holiday under the Working Time Regulations, which were the specific rights claimed in this case.

The Employment Tribunal concluded that any driver who (a) has the Uber App switched on; (b) is within the territory he is authorised to work; and (c) is able and willing to accept an assignment, is working for Uber under a ‘worker’ contract whilst those conditions are met. The idea that there was an overarching ‘umbrella’ contract was expressly ruled out (and not argued by the Claimants).

Uber have already announced they will appeal and the final outcome is unlikely to be known for some time. It is possible that claims lodged in response to this decision will be stayed pending the final outcome. If upheld, this decision will open the way for those working for Uber and potentially a number of other organisations to secure the rights claimed, and other rights which apply by law to workers. Such rights are almost identical to those which apply to employees, but exclude parental rights and dismissal rights.

Further, pensions auto-enrolment obligations extend to workers as well as employees and this could represent a substantial financial and administrative burden for businesses. An unintended consequence could be that such workers will need to be included in gender pay gap reporting exercises; the final regulations have not yet been published but there has been a strong indication that they will cover workers and not just employees.

Given the public interest in this case, the Employment Tribunal reviewed in detail whether the contractual documentation which governed the relationship between Uber, its drivers and the end-user customers truly reflected the reality on the ground. In this case, it was made clear that the label placed on the parties’ arrangement was not to be the determining factor as it did not reflect the reality of the situation.

Wider impact on the media sector

The trend of companies taking on self-employed workers who work through Apps has increased significantly across the world over the past few years. We often see tech start-ups engaging individuals as consultants (rather than employees) in the early stages of a businesses’ life.

The wider impact of the Uber decision may lead to companies in the media and tech space being faced with similar claims, which could be the driver for them changing their business models, or having to pass the increased costs onto their customers.

The growth of the ‘worker economy’ may well lead to a decrease in the number of employees, which impacts upon tax revenues. It therefore remains to be seen whether taxation legislation will be amended to deal with the potential loss of 13.8% in employer national insurance contributions which applies to employees, but not to workers.

The realisation that current legislation has not kept up with modern work practices has led the Prime Minister to order a review of employment practices to ensure workers’ rights are protected under these new business models and a growing trend towards flexible working or self-employment.

Written by Penny Hunt and Tom Mintern

Penny is a Legal Director in Bird & Bird's Employment Group, based in London. She has clients in a wide range of sectors including music, media, construction and information technology. Penny advises extensively on a wide range of issues, including senior executive terminations, redundancy exercises and complex disciplinary and grievance matters. Penny has significant experience of managing complex litigation in the Employment Tribunals defending employers against claims such as unfair dismissal, unlawful deductions from wages, discrimination and whistleblowing claims. She also acts for executives which informs her commercial and down to earth approach in advising her employer clients.


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